Market Overview

Managing Rapid Online Business Expansion


A major challenge that entrepreneurs can encounter as they grow their online businesses is sourcing the necessary capital to fund the expansion. This potential obstacle to development becomes even greater when the online business enjoys great success and enters a period of rapid growth. Many such business owners who find themselves in this situation realize, sometimes too late, that they have underestimated the cost of expansion, or that too many expensive assets have been acquired. This often leaves the business without the cash necessary to complete the expansion process and forces the owner to borrow or charge his or her way through the growth phase.

Online business entrepreneurs can avoid much of this struggle and strife by ensuring that the financial foundation of the company is solid from the start, and by taking steps to establish that sound management of the company’s finances is in place

Managing online business finances

Whether the business is an established company or a small start-up initiative, online businesses are exactly the same as any other when it comes to the management of finances; well-managed finances are essential. Brick-and-mortar banks and other financial institutions offer a wide variety of investment and financial management options, in addition many offer web-based banking and investment services that will be well suited to an online company. Some financial institutions even offer banking and investment services online exclusively, making it possible to eliminate certain conditions and fees, such as monthly account minimums and charges. 

When checking out the money market it should be remembered that online banks offer the same savings options as their brick-and-mortar counterparts, including online savings accounts, Certificates of Deposit, also known as CDs, and money market accounts. Though savings accounts are more accessible than CDs or money market accounts, which may only be accessed at specified times as determined at the time of investment, they all serve to hold money deposited and grow the amount invested through the accumulation of interest. Money markets also increase the original amount through investment. Banks invest the money deposited into a money market account in various government and corporate securities, depositing a portion of the returns into the original account. 

Financial tips and advice for online business owners

Unfortunately - and this happens often – the owner of a business may suddenly realize that expansion is essential to cope with the increased demand for its products or services.  If the company has large cash reserves this does not present too much of a problem as it can take on extra staff and increase available resources without delay.  Sadly, this is often not the case and the business is unable to fund its own growth from reserves.  This is when the problem of financing the expansion becomes a real headache and there is little option but to borrow funds.  The cost of the borrowing then has to be factored in to the overall costs of running the business; it will not be cheap and regular repayments will have to be met even if the cash flow takes a downturn for some reason.

Be prepared

Optimism is a useful personality trait in business people and is often a main feature of thrusting entrepreneurs.  This can be a great advantage if the individual assumes from early on that he or she will be a great success and that the business will rapidly expand.  That optimism and self-belief should be put to good use in thinking well ahead and preparing financially for expansion.  In other words a sound business plan should take future growth, and how it is to be paid for, into account well ahead of time.  

A great place to start when contemplating growing a business is to review the service budget for the previous couple of years. Understanding the average costs to deliver a quality service for customers will indicate to business owners what, if necessary, needs to be cut and where, as well as anticipating the costs required for expansion.

It is also a good idea to take a look at how the most successful online businesses have gone about expanding.  Gain some insight into this by studying a publicly traded company such as Amazon. Amazon (AMZN: NASDAQ) has done a wonderful job of expanding its online business.

Consider outsourcing

Outsourcing certain administrative tasks to specialized firms or perhaps an umbrella company, is a good way to free up valuable cash that would otherwise be tied up in IT personnel, servers or payroll management. 

Get the right software in place

Though it may seem a minor part of online business management, choosing the right accounting software is actually vitally important. Dozens of options are available and finding the right package for a particular business can be difficult. While other online business owners may have valuable opinions and suggestions, there are also free online tools that can match a business to the most appropriate accounting software.  Also, many small business websites and forums offer lists of accounting software programs and sites that are worth reviewing.


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